New Delhi: The Coimbatore-based ancillary supplier Pricol has said that it may not hit its revenue target of INR 4,000 crore by financial year (FY) 2025-2026 because of the supply chain constraints of the past two quarters.
Blaming the ongoing semiconductor crunch and inflated commodity prices, Vikram Mohan, Managing Director of Pricol, said in a recent call that the company is likely to miss its targets for revenue by 12 months.
“The total headwinds in the industry may set back the entire industry by 12 to 18 months. So, this (INR 4,000 crore revenue target) was with the prediction that supply chains would come back to normal. This was what we anticipated last year but with this delay there would be a delay in the entire programme or of these numbers by one year,” Vikram said over a call with analysts.
In January, the company disclosed its plan to increase its capacity value from the current INR 2,400 crore to INR 4,000 crore as it aimed at becoming a long-term debt-free company by Q3 FY23. Despite headwinds, the company has reduced its long-term borrowing from INR 245 crore to INR 77.58 crore.
Vikram further highlighted that companies like Pricol that are extremely dependent on ICs and electronic raw materials as its core inputs faced extreme supply chain constraints and freight disruptions.
“We could have at least performed 20% higher in terms of top line and about 30% higher in terms of bottom line but not for these bottlenecks that we have been facing since seven-eight months. It is expected to continue for the next few quarters as well,” he said.
In the quarter ended March 31, 2022 the auto parts maker reported a 7% decline in its consolidated total income to INR 415.8 crore as against INR 447 crore in the corresponding quarter last year. However, its net profit jumped to INR 17 crore in Q4 FY22 up from just over INR 1 crore in the year-ago quarter. Its earnings before interest, tax, depreciation and amortization (operational EBITDA) contracted by 11.6% at INR 50.75 crore as against INR 57.42 crore last year’s fourth quarter.
According to the company management, EBITDA has been under stress by at least about 300 to 350 basis points because of the steep increase in electronic chip costs and supply chain cost.
“Sudden cost increases due to supply chain disruptions and premium prices being paid for electronic parts is not indexed and, on a case-to-case basis we are connecting it from our customers and absorbing part of it which is resulting in the partial EBITDA loss of about 3-3.5%. As a result, our EBITDA has come down from about 15% to about 11.5%-12%,” Vikram explained.
He also noted that till the headwind continues in the industry, which is expected for another four quarters, the company’s EBITDA will be at a similar level.
Pricol has a diversified product mix of driver information systems (DIS), pumps and mechanical products, wiping systems, and switches and sensors among others with no single product contributing to over 50% of the revenues. Notably, the company is world’s second-largest manufacturer of DIS for the two-wheeler segment, India’s largest manufacturer of automotive pumps for the two-wheeler segment, the world’s fourth-largest manufacturer of Instrument clusters for tractors and off-highway vehicles, India’s largest manufacturer of telematics solutions for tractors and off-highway vehicles.
At present, Pricol derives 65% of its revenue from the two-wheeler segment, of which 57% is from its top three customers. Besides, the company is increasing its presence in passenger vehicles, commercial vehicles and off-road segment which contributes 7%, 15% and 6% respectively to the overalls sales.
With a presence for over five decades, its top five customers include TVS Motor Company, Hero MotoCorp, Bajaj, Tata motors and JCB which contribute to 65% of its total domestic revenue.
With a quicker turnaround on investments, the packaging segment would also make India an important node in the global supply chain of semiconductors, used from phones to high-end cars.
Taiwan is a key supplier to the global electronics ecosystem, with parts used in everything from refrigerators and smartphones to cars and missiles.
